CHINESE CHINESE INVESTMENTS IN BRAZIL INVESTMENTS 2016 IN BRAZIL 2016 ABOUT THE PUBLICATION
Aiming to provide insight on the Chinese investments scenario in Brazil in 2016, the purpose of this publication is to offer a general overview of such activity to the business community, government agencies and analysts. The sources and information disclosed in this document were selected and complied through a CBBC survey, based on news reports during this period. CHINESE INVESTMENTS IN BRAZIL 2016
PRESIDENT Ambassador Luiz Augusto de Castro Neves
REPORT PREPARATION Santiago Bustelo, Research and Analysis Coordinator Tulio Cariello, International Analyst Gabriel Fragoso, Intern
GENERAL COORDINATION Roberto Fendt, Executive Secretary
TEAM Denise Dewing, Institutional Analyst Jordana Gonçalves, Financial Analyst
TRANSLATION Christine Puleo
MAY / 2017 Table of Contents
05 17 CHINESE INVESTMENTS IN BRAZIL - DISTRIBUTON BY SECTOR HIGHLIGHTS 20 06 GEOGRAPHICAL DISTRIBUTION A NEW PHASE OF CHINESE INVESTMENTS IN BRAZIL 22 DESCRIPTION OF ANNOUNCED 12 INVESTMENTS GENERAL ANALYSIS 26 15 TABLE: ENTRY MODE OF CHINESE CHINESE INVESTMENTS IN COMPANIES IN BRAZIL BRAZIL (2016)
Graphs
Graph 1 - Chinese investment projects in Brazil – 2016 12 Graph 2 - Evolution of Chinese investment projects in Brazil – 2007-2016 13 Graph 3 - Chinese investment in Brazil by type of company– 2007-2015 14 Graph 4 - Entry mode of Chinese companies in Brazil (2016) 15 Graph 5 - Entry mode of Chinese companies in Brazil (2007-2016) 16 Graph 6 - Distribution by sector of projects announced in 2016 (number of projects) 17 Graph 7 - Distribution by sector of projects announced in 2016 (US$ million) 19 Graph 8 - Geographical distribution of projects announced in 2016 by Region (%) 20 Graph 9 - Geographical distribution of projects announced in 2016 by State (%) 21 CHINESE INVESTMENTS IN BRAZIL 2016
CHINESE INVESTMENTS IN BRAZIL - HIGHLIGHTS
Development: CBBC
5 CHINESE INVESTMENTS IN BRAZIL 2016
A NEW PHASE OF CHINESE INVESTMENTS IN BRAZIL
In recent years, Chinese investments in Brazil have become increasingly relevant to Brazil’s economy. The entry of Chinese companies has been gaining ground both in terms of volume of activity and breadth of sectors since 2010. This phenomenon has developed in distinctive ways over time, being possible to distinguish four phases of investment, each with specific characteristics. The year 2015 marked a new phase of Chinese investments in Brazil, characterized not only by an increase in value invested, but also in terms of the types of projects on which Chinese companies have focused their activities.
6 CHINESE INVESTMENTS IN BRAZIL 2016
etween 2007 and 2009, the Brazil- relationship, directed not only at trade but at China trade flow was already one of a broader range of partnerships as well. importance and demonstrated a clear B Initially, China prioritized investment in growth trend, but overall Chinese investment activities directly linked to commodities, in the country was not highly relevant. This which account for the bulk of Brazil’s exports situation changed starting in 2010, a year to the Asian country. As an illustrative that marked a transformation for important example, the purchase of 40% of the Brazilian Chinese companies in relation to Brazil, as operations of the Spanish company Repsol they announced large-scale investments that by the Chinese state-owned Sinopec may would start to be regular (but with different be mentioned. This acquisition is fully profiles) in the years that followed. aligned with the volume of Brazilian crude Between 2010 and 2015, US$ 67.5 billion in oil imported by China and with the global Chinese investments were announced in the internationalization process of Chinese country, of which US$ 37.1 billion of these companies, which have made several was confirmed. This phenomenon undeniably purchases of companies associated with the ushered in a new phase in the bilateral exploration of natural resources.
Initially, China prioritized investment in activities directly linked to commodities, which account for the bulk of Brazil’s exports to the Asian country.
7 CHINESE INVESTMENTS IN BRAZIL 2016
During the second phase, taking place in the country or acquired shares of Brazilian between 2011 and 2013, a gradual change in or international banks already operating the profile of Chinese investments in Brazil in Brazil. These operations were aimed at can be observed. During this period, Chinese supporting the gradual internationalization companies sought new opportunities in of the Yuan, as well as bilateral trade and the industrial area, particularly in the investment. An example of this type of move machinery, equipment, automobile and is the arrival of the Industrial and Commercial electronic devices sectors, with an eye on Bank of China (ICBC) in Brazil through an the Brazilian domestic market. The arrival of initial investment of US$ 100 million. machine and equipment builders (Sany) and automobile manufacturers (Chery), as well A new turning point occurred between 2014 as the expansion in the country of already and 2015, when the volume invested by established enterprises in the electronics and Chinese companies in Brazil began to grow communication sector (Huawei and Lenovo), considerably and such projects started to was directly linked to the favorable conditions undergo not only through quantitative that Brazil offered for such investments. changes but also in administrative and Among these conditions were the strong strategic matters. This new phase is defined pace of economic growth and the expanding by a series of specific characteristics aligned domestic consumer market. with the rhythm defined by the general The process of diversification of Chinese context of Chinese investments worldwide, investments in Brazil followed with a transformations in terms of perceived subsequent interest in the services sector, attractiveness of certain sectors of the mainly in the financial area. A third phase of Brazilian economy, the entry mode of these the bilateral relationship began around 2013, companies in the country, and the overall when Chinese banks established themselves situation of the Brazilian economy.
During the second phase, Chinese companies sought new opportunities in the industrial area.
8 CHINESE INVESTMENTS IN BRAZIL 2016
A third phase of the bilateral relationship began around 2013, when Chinese banks established themselves in the country or acquired shares of Brazilian or international banks already operating in Brazil.
Throughout 2015, purchasing activities by the agribusiness sector, mainly through the Chinese companies around the world hit acquisition of trading companies, are also a the highest level in history, surpassing a key feature of this phase. value of US$60 billion, according to a survey conducted by the Rhodium Group1. Recent Recently, the entry mode of Chinese Chinese acquisitions on a global scale have enterprises in Brazil also demonstrates had an effect on Brazil, as can be seen in cases some specific features that signal structural such as the purchase of Nidera and Noble by changes in the investment scenario in COFCO and Pirelli by ChemChina. Given this, the country. In recent years, the Chinese it is possible to state that the growth in the companies have opted for operations based volume of Chinese investments observed on mergers and acquisitions (M&A), be they in Brazil in the last biennium is aligned with national or foreign. Since 2014, the entry what is taking place worldwide. mode through M&A has accounted for most of the Chinese projects in the country. This This fourth phase also marks a shift in the characteristic reflects a global particularity sectors of the economy in which Chinese of Chinese investment, which has shown investors have advanced. Starting in 2014, Chinese companies invested considerable a strong tendency to buy assets already in amounts in the area of production and operation abroad. In the Brazilian context, transmission of electricity. Companies such there are indications that mergers and as State Grid and China Three Gorges won acquisitions are the most efficient means for bids for the construction of hydroelectric Chinese companies to establish themselves plants and transmission lines and acquired on national soil, as it allows the control the assets of Brazilian and foreign companies of highly mature assets in the domestic in the Brazilian energy sector. Investments in market.
1 http://rhg.com/notes/chinas-global-outbound-ma-in-2015, consulted in March 2017.
9 CHINESE INVESTMENTS IN BRAZIL 2016
Starting in 2014, Chinese companies invested considerable amounts in the area of production and transmission of electricity.
Finally, the participation of Chinese companies required capital to execute initiatives in this in tenders within the infrastructure sector area that are aligned with the interests of is another characteristic of this new phase. the Asian giant in the region, facilitating The Brazilian shortcomings in this sector has the outflow of the main products in Brazil’s created a window of opportunity for Chinese basket of exports, such as soy and minerals. investors, already recognized for their In 2016, such trends within this new phase of experience in implementing infrastructure Chinese investments in Brazil were confirmed projects. In complement, China has the and further developed.
Finally, the participation of Chinese companies in tenders within the infrastructure sector is another characteristic of this new phase.
10 CHINESE INVESTMENTS IN BRAZIL 2016
The China-Brazil Business Council is a pioneer in executing independent studies on Chinese investments in Brazil, having previously conducted four studies of varying perspectives and degrees of analysis. This present publication has explored the fundamental points and particularities of this new phase of Chinese presence in Brazil. In this context, the CBBC aims to collaborate for an enhanced understanding of the Sino-Brazilian relationship, providing useful information to the public, private, academic and civil society sectors.
11 CHINESE INVESTMENTS IN BRAZIL 2016
GENERAL ANALYSIS
The survey conducted by the China-Brazil Business Council (CBBC), based on news reports1 regarding Chinese investments in Brazil, recorded 16 projects announced in 2016, totaling US$ 12.5 billion. Of these, 12 projects totaling US$ 8.4 billion are confirmed, according to the CBBC research team that is in direct contact with Chinese companies and their Brazilian partners.
GrAPH 1
Chinese Investment Projects in Brazil – 2016
25% Number of Value of Projects 33% Projects
Announced Announced 75% (4 projects) 67% (US$ 4,1 billion) Confirmed Confirmed (12 projects) (US$ 8,4 billion)
Source: Consolidated CBBC list
A comparative analysis of investments realized in 2016 and projects from previous years shows a progressive increase in the value of investments. The value of the projects confirmed (US$ 8.4 billion) exceeds that of 2015 (US$ 7.4 billion). In this way, we can see that in 2016 there was a development of the trend that started in 2015, when there was notable growth in values invested by Chinese companies in the country.
1 The sources for the survey were high-circulation Brazilian newspapers and news portals.
12 CHINESE INVESTMENTS IN BRAZIL 2016
GrAPH 2
Evolution of Chinese investment projects in Brazil – 2007-2016
Value of 40,000 Projects 35,000 (US$ Million) 30,000
Total 25,000 35,792
Confirmed 20,000
15,000 12,538 11,880 9,382 8,397
10,000 8,030 7,446 4,791 3,645 3,449 5,000 3,415 2,036 1,730 13,090 564 549 0 2007-2009 2010 2011 2012 2013 2014 2015 2016
Number of 25 Projects 20 21 Total 18 Confirmed 15 17 16 16 14 13 13 13 13 10 11 12 12 9 5 7 5
0 2007-2009 2010 2011 2012 2013 2014 2015 2016
Source: Consolidated CBBC list
As noted in the introduction to this research, a new phase of Chinese investments in Brazil began in recent years, characterized not only by the increase in value invested, but also by the type of projects on which Chinese companies have focused their activities.
A considerable portion of investment projects confirmed for the 2015-2016 biennium corresponds to projects in the area of electric energy, a sector that is distinguished by high investment values and relatively long maturity periods.
The activities of large companies such as State Grid and China Three Gorges, which had already made significant investments in 2015, continued to further develop in 2016. However, in the past year, these companies concentrated on acquiring assets from other companies already operating in the Brazilian electricity sector. State Grid completed the acquisition of an equity stake of CPFL Energia and CPFL Renováveis, considerably expanding its participation in the Brazilian market, in the transmission and distribution sectors and, above all, the generation of electricity from renewable energy resources. China Three Gorges acquired Duke Energy’s assets in Brazil in a US$ 1.2 billion transaction.
13 CHINESE INVESTMENTS IN BRAZIL 2016
In addition, the entry of Chinese investors into Brazilian agribusiness, which is another major specificity of this new phase, continued in 2016. Hunan Dakang Pasture Farming, a business of the Chinese holding group Shanghai Pengxin Group, invested about US$ 200 million in the acquisition of a 57% share of the Brazilian trading company and grain processor Fiagril.
When analyzing the types of Chinese companies that invested in Brazil in 2016, it can be observed that a large number is still composed of central state-owned companies that lead the way in projects related to the energy sector. However, it should be noted that in the last three years, private companies have been increasing their presence in the country, mainly in the manufacturing and services sectors.
GrAPH 3
Chinese investment in Brazil by type of company– 2007-2015
14 Central state State Private 12 12
10 10
8 9 9 8
6 6 6 6 6
4 5 4 4 4 3 2 3 3 3 3 3 3 3
0 1 1 0 2007-2009 2010 2011 2012 2013 2014 2015 2016
Source: Consolidated CBBC list
14 CHINESE INVESTMENTS IN BRAZIL 2016
ENTRY MODE OF CHINESE COMPANIES IN BRAZIL
In 2016, there was a predominance of Chinese investments in Brazil through mergers and acquisitions (M&A), which accounted for slightly more than half of all ventures. The preference of the Chinese for acquiring local assets can be explained in part by the ease of operating through companies already consolidated in the domestic market. Among the sectors of note in which Chinese companies entered Brazil through M&A are the financial, infrastructure, agribusiness, energy and mining areas.
GrAPH 4
Entry mode of Chinese companies in Brazil (2016)
20%
Mergers and Acquisitions (M&A)
53% Greenfield 27% Joint Venture
Source: Consolidated CBBC list
15 CHINESE INVESTMENTS IN BRAZIL 2016
Following this are greenfield investments, which account for 27% of the total, with the presence of the manufacturing sectors being observed. In the case of Chinese investment starting from the ground up, there were projects in the electronics, renewable energy, and automotive sectors, in addition to an announced steel sector project.
The arrival of Chinese companies through joint ventures also played a role, and corresponded to 20% of the overall total. The home appliance area, in particular, had notable participation. Chinese companies such as TCL and Midea have opted to participate in local alliances, in order to expand their presences in the Brazilian domestic market, given the advantage offered by the previous expertise of partners already operating in Brazil.
GrAPH 5
Entry mode of Chinese companies in Brazil (2007-2016)
14 Greenfield Mergers and Acquisitions (M&A) Joint Venture 12 12
10 11
8 9 9 8 8 8
6 7 6 6 4 5 4 4 4 2 3 3 3 3 2 2 2 0 1 1 0 2007-2009 2010 2011 2012 2013 2014 2015 2016
Source: Consolidated CBBC list
In analyzing the history of entry modes of Chinese companies in Brazil, it should be noted that the new investment phase includes a resumption of mergers and acquisitions that corresponds to the majority of projects in the country since 2014. This new entry mode reflects a global particularity of Chinese investment, which has demonstrated a strong tendency to acquire assets already in operation overseas. In turn, there are indications that mergers and acquisitions are the most effective means for Chinese companies to establish themselves in Brazil, as it allows for control of mature assets in the domestic market.
It is worth mentioning that unlike other years, when the acquisition of the Brazilian operations was a part of a global acquisition (as in the case of the purchase of Pirelli by ChemChina), these recent operations instead are directly aimed at the Brazilian market.
16 CHINESE INVESTMENTS IN BRAZIL 2016
DISTRIBUTION BY SECTOR
Distribution by sector by number of projects
The year 2016 featured projects in nine sectors, including areas in which the Chinese had already invested, such as energy and manufactured goods, and also in areas that previously were relatively unexplored but of great interest to the Asian country, such as mining and steel.
GrAPH 6
Distribution by sector of announced projects 2016 (number of projects)
6
5 5 4
3 Finance Infrastucture Energy Home appliances 2 2 2 2 Telecom Steel Mining Agrobusiness Automobile 1 1 1 1 1 1
0
Source: Consolidated CBBC list
17 CHINESE INVESTMENTS IN BRAZIL 2016
As was the case in the previous two years, the energy sector played a significant role, representing the largest number of investment projects in Brazil in 2016. With contributions from companies such as State Grid, China Three Gorges, BYD and the sovereign fund China Investment Corporation, the sector experienced a considerable increase in the number of projects. The trend of increased investments in this area is notable not just because of the amount, but also because it points out that the Brazilian energy sector combines characteristics and opportunities that are unique in the world in terms of investment attraction.
In the home appliance sector, there were investments with national reach, through joint ventures signed between Chinese companies and local partners. Examples include the Midea- Springer and TCL Multimedia-SEMP partnerships.
The financial sector, for its part, received a new contribution announced by China Construction Bank, which had already incorporated the operations of BicBanco in Brazil, and also the Fosun Group, through the acquisition of shareholder control in Rio Bravo.
The infrastructure sector in the country, which traditionally has certain deficiencies, received contribution from the China Communications Construction Company (CCCC). The company focused on investments in the areas of civil and port construction.
The agribusiness sector received investment through the acquisition of the Brazilian trading company Fiagril by Hunan Dakang. This underscores the Chinese strategy of buying smaller trading companies abroad, aiming to gain greater control over the flow of agricultural products, mainly grains, to China.
The automobile sector, which has been presenting nearly continual investments in Brazil, has attracted the automaker Zotye, which intends to build a plant on national soil.
China Unicom announced an ambitious project in the telecommunications area, informing Fortaleza´s city government that it will begin the licensing and registration phase for installation of the submarine fiber-optic cable that will connect the Brazilian state of Ceará to Cameroon.
There was also Chinese presence in the mining and steel sectors. CMOC International acquired Anglo American Group’s niobium and phosphate businesses. CBSteel announced the signing of a memorandum with the Brazilian government, for plans to invest in the construction of a steel mill in Maranhão.
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Distribution by sector by value of projects
In analyzing Chinese investments in Brazil in 2016 in terms of value of the projects, once again there is clear predominance of projects related to the energy area. Building on investments made in previous years, State Grid and China Three Gorges continued with an entry strategy based mainly on acquisitions of companies already operating locally. Overall, investments in the sector total US$ 6.6 billion.
GrAPH 7
Distribution by sector of projects announced in 2016 (US$ million)
7.000
6.000 6.654
5.000 Energy 4.000
3.000 3.500
2.000 Mining Steel Infrastucture Agrobusiness Finance
1.700 Home appliances
1.000 Automobile 215 200 200 64,3 8,6 0
Source: Consolidated CBBC list
Among confirmed projects, the mining sector emerged as second in terms of value, with contributions of approximately US$ 1.7 billion. The infrastructure and agribusiness each contributed approximately US$ 200 million in investment. It was not possible to calculate a total value for the financial sector. China Construction Bank announced an investment of nearly US$ 200 million, but the value of the acquisition of the controlling stake in Rio Bravo by Fosun, which should be considered in the estimate, was not disclosed.
Comparatively speaking, the manufacturing sector presented the lowest values. Investments in the area of home appliances reached US$ 64.3 million, while in the automotive sector the amount totaled US$ 8.6 million.
As is the case with the financial sector, it was not possible to estimate investment in the telecommunications area, due to the unavailability of data referring to the fiber-optic cable project linking Brazil to Africa.
19 CHINESE INVESTMENTS IN BRAZIL 2016
GEOGRAPHICAL DISTRIBUTION
In 2016, as was the case in previous years, the Southeast region accounted for the bulk of Chinese investments in Brazil, corresponding to more than half of the Asian country’s projects in Brazil. After the Southeast, the second-largest presence of Chinese investments was in the Brazilian Northeast and Central- West, followed by the South and North regions.
GrAPH 8
Geographical distribution of projects announced in 2016 by Region (%)
17% Southeast South 56% Northeast North 17% Center-West
6% 6%
Source: Consolidated CBBC list
In analyzing the distribution of Chinese companies in Brazil by state, once again, it is clear that the state of São Paulo is highly attractive, accounting for 44% of all investments in the country. Following this, the states with the largest number of investments were, in this order: Rio de Janeiro, Goiás and Maranhão, followed by Rio Grande do Sul, Mato Grosso, Ceará and Amazonas.
20 CHINESE INVESTMENTS IN BRAZIL 2016
GrAPH 9
Geographical distribution of projects announced in 2016 by State (%)
São Paulo 44%
Rio de Janeiro 11%
Maranhão 11%
Goiás 11%
Rio Grande do Sul 6%
Mato Grosso 6%
Ceará 6%
Amazonas 6%
0 10% 20% 30% 40% 50%
Source: Consolidated CBBC list
21 CHINESE INVESTMENTS IN BRAZIL 2016
DESCRIPTION OF PROJECTS
mainly realized in the city of Goianésia, in the Agrobusiness state of Goiás, where the company will build an industrial unit that will manufacture 100% electric vehicles – including automobiles, scooters and utility models.
Home Appliances
HUNAN DAKANG PASTURE FARMING
Hunan Dakang Pasture Farming, a unit of the Chinese Group Shanghai Pengxin Group, invested about US$ 200 million in the acquisition of a 57% share of Brazilian grain trading and processing company Fiagril Ltda. The investment mainly concerns soy and corn MIDEA and is located in Lucas do Rio Verde, Mato Grosso. In 2016, Midea invested in the creation of the Springer Midea sub-brand that will mark the new air conditioners and climate control equipment produced in the country. The Automobile combination of both brands involved an investment of R$ 15 million, and includes new product development in Canoas, Rio Grande do Sul, and trade marketing at the company’s office in São Paulo. Since the creation of the joint venture between Midea and Carrier in August 2011, the Midea operation in Brazil has been executed through the agreement. Midea Carrier ABC JV operates in Argentina, Brazil and Chile and includes the brands Midea, Carrier, Springer and Toshiba (the latter ZOTYE only involves commercial air conditioning Zotye Motors of Brazil invested R$ 30 million products). As the residential climate control in the country in 2016. The investment was portfolio had many products and several
22 CHINESE INVESTMENTS IN BRAZIL 2016
brands from the same company, management The transaction will be executed through an decided to restructure, merging brands and Investment Partnership Fund, whose remaining creating the Springer Midea sub-brand, which shareholders are British Columbia Investment translates more into a marketing strategy Management Corporation (BCIMC), GIC Private than a business strategy. Limited (GIC) and CIC Capital Corporation, a wholly-owned subsidiary of China Investment Corporation (CIC). According to information TCL MULTIMEDIA from Petrobras, CIC should hold 8.5% of the fund. Through the signing of a memorandum of understanding, the Chinese TCL Multimedia announced intention to invest US$ 60 CHINA THREE GORGES million in a joint venture with SEMP, a leading Brazilian home appliance company. China Three Gorges Corporation (CTG), The initiative serves as an important step in through CTG International, CTG Brasil and the process of internationalization of the other subsidiaries, concluded the acquisition company, as well as a significant moment for of Duke Energy’s assets in Brazil in December the expansion of its businesses in Brazil and 2016. With the transaction totaling US$ 1.2 potentially in South America as well. billion, CTG Brasil increased the installed capacity under its management to 8,27 GW.
ENERGY The assets include eight hydroelectric plants with a total installed capacity of 2,242 MW, located on the Paranapanema River, and two small hydroelectric plants with a total installed capacity of 32 MW, located in the Sapucaí-Mirim River, in São Paulo State.
STATE GRID
State Grid completed the acquisition of a 54.64% equity stake in CPFL Energia through BYD ENERGY the purchase of shares owned by Camargo BYD invested approximately R$ 80 million Corrêa and Previ, Cesp, Sabesprev, Sistel and in Campinas, in the countryside of the State Petros pension funds. With this acquisition, of São Paulo, in solar panels and electric bus the Chinese company will take control of CPFL, chassis production units. thus considerably expanding its coverage in the Brazilian market in the transmission and distribution sectors, particularly in the generation of electricity from renewable CHINA INVESTMENT CORPORATION (CIC) energy sources. In total, State Grid acquired In September 2016, Petrobras’ board of 556,164,817 common shares of CPFL Energia at directors approved the sale of 90% of the R$ 25.51 per share, equivalent to a transaction shares of Nova Transportadora de Sudeste valued at R$ 14.19 billion. An agreement for (NTS) to Brookfield Infrastructure Partners acquisition of shares of CPFL Renováveis, (BIP) and its affiliates for US$ 5.19 billion. owned by Camargo Corrêa, at R$ 12.20 per
23 CHINESE INVESTMENTS IN BRAZIL 2016
share, or R$ 3.17 billion in total, was also made. Infrastructure
As a result of the change in company control, State Grid is expected to hold a Share Acquisition Public Offer (OPA), for minority shareholders of both CPFL Energia and CPFL Renováveis.
Finance CHINA COMMUNICATIONS CONSTRUCTION COMPANY (CCCC)
The company China Communications Construction Company (CCCC) has agreed to acquire 80% of the capital of Brazilian construction company Concremat Engenharia for R$ 350 million. The Chinese group has interests in infrastructure projects, heavy equipment and dredging services in Brazil, where it plans to invest US$ 1 billion in the midterm. Concremat has confirmed that it CHINA CONSTRUCTION BANK/BIC BANCO signed a preliminary agreement, with terms More than two years after initiating a and conditions to be defined at a later date. purchase for control of BicBanco as a mean of entering Brazil, the Chinese banking giant China Construction Bank (CCB) agreed to a China Communications Construction Company capital injection of US$ 200 million in the (CCCC), a Chinese conglomerate operating in near future, as a result of initial difficulties in infrastructure, heavy equipment and dredging establishing its operations in Brazil. services, will participate in the Private Use Terminal in São Luís, Maranhão, a WPR multi- port terminal, the infrastructure arm of the WTorre group. The Chinese partner will invest FOSUN GROUP R$ 400 million for construction of the project. The Fosun Group, a private investment holding The details of the project should be negotiated company with an international presence and by the end of the due diligence process by assets worth US$ 60.75 billion, confirmed in Banco Modal, which is the exclusive financial 2016 the purchase of a controlling stake in advisor for CCCC in the region. During the first Rio Bravo, manager of R$10 billion in assets. half of 2016, the company inaugurated the The acquisition is part of Fosun’s expansion São Paulo office of the CCCC South America strategy in emerging countries, with Brazil Regional Company, a CCCC holding company serving as a gateway for the conglomerate in created exclusively to handle business in Latin America. South America, where the Asian group intends to have a greater presence.
24 CHINESE INVESTMENTS IN BRAZIL 2016
a production capacity of 3 million tons per Mining year in its first phase. By the end of phase two, the unit should be able to produce 10 million tons annually. The amount invested in the first phase would be US$ 3.5 billion and approximately US$ 4.5 billion in the second. The Secretary of Development, Industry and Commerce of Maranhão said that this is a long-term venture, with the completion of the first phase expected in about eight years. The project was announced by the then-Foreign Minister, José Serra, during the official visit of CHINA MOLYBDENUM Brazilian President Michel Temer to China.
The Anglo American Group signed a deal with Cmoc International, the international arm of China Molybdenum (CMOC), selling its Niobium and Phosphates business to the Telecommunications Chinese company for a total value of US$ 1.7 billion, with US$ 1.5 billion representing the agreed-upon purchase price and another US$ 187 million referring to adjustments necessary to complete the deal. The Niobium and Phosphates businesses are located in the states of Goiás and São Paulo and include mines, mineral deposits, chemical complexes, processing plants and Sales and Marketing offices in the United Kingdom and Singapore. CHINA UNICOM
The company China Unicom has informed the Fortaleza´s city government that it Steel will begin the licensing and registration phase for installation of the fiber-optic submarine cable that will link Fortaleza (Brazil) to Cameroon (Africa). The value of the investment was not disclosed, and completion is forecast for 2018.
CBSTEEL
China Brazil Xinnenghuan International Investment (CBSteel) has plans to build a long steel mill in the state of Maranhão with
25 CHINESE INVESTMENTS IN BRAZIL 2016
TABLE: CHINESE INVESTMENTS IN BRAZIL (2016)
Entry Origin Company Destination Company Sector Status State Value Mode in Brazil
China Construction Bank BIC Banco Finance Announced SP US$ 200 million M&A Hunan Dakang Pasture Fiagril Agrobusiness Confirmed MT US$ 200 million M&A Farming CCCC Wtorre Infrastructure Confirmed MA US$ 115 million JV CCCC Concremat Infrastructure Confirmed RJ US$ 100 million M&A State Grid CPFL Energia Energy Confirmed SP US$ 4.08 billion M&A State Grid CPFL Renováveis Energy Confirmed SP US$ 910 million M&A Zotye - Automobile Confirmed GO US$ 8.6 million GF China Unicom - Telecom Announced CE Not disclosed GF Fosun Group Rio Bravo Finance Confirmed SP Not disclosed M&A BYD Energy - Energy Confirmed SP US$ 23 million GF Midea Springer Home appliances Confirmed SP/ RS US$ 4.3 million JV CBSteel - Steel Announced MA US$ 3.5 billion GF Cmoc/China Molybdenum Anglo American Mining Confirmed GO/SP US$ 1.7 billion M&A China Three Gorges Duke Energy International Energy Confirmed SP US$ 1.2 billion M&A Brazil Holdings TCL Multimedia/SEMP SEMP TCL Home appliances Confirmed AM US$ 60 million JV China Investment Petrobras Energy Anunciado RJ US$ 441 million - Coorporation
Total (US$ mil) 12,538,844 Confirmed 8,397,844 Announced 4,141,000
Development: CBBC
26 ABOUT CBBC
Who WE ARE BOARD OF DIRECTORS
The China-Brazil Business Council (CBBC) was PRESIDENT founded in 2004. It is a non-profit bilateral Ambassador Luiz Augusto de Castro Neves institution comprised by two independent Sections, one in Brazil and the other in China. The CBBC seeks to promote dialogue among firms of PRESIDENT EMERITUS both countries. The CBBC focuses its activities on Ambassador Sergio Amaral structural issues in China-Brazil bilateral relations, aiming to improve the climate for business and investment between the two countries. VICE-PRESIDENTS Marcio Senne de Moraes The CBBC’s working agenda involves contact Director of External Relations at Vale with authorities of both governments, periodic gatherings of Brazilian and Chinese firms, Marcos Sawaya Jank thematic seminars, mechanisms for sharing Global Executive Director for Corporate Affairs at BRF business experiences, and the dissemination of important business research. Octavio de Barros Economic Advisor at Banco Bradesco The CBBC’s two Sections are completely autonomous and define their activities according DIRECTORS to the interests of their members, while cooperating intensively to foster mutual trade Nelson Salgado and investment. Vice-President of Strategy and Institutional Relations at Embraer
Pedro Freitas Partner, Veirano Advogados
Roberto Milani Vice-President of Comexport
Renato Lulia Jacob CEO of Itaú BBA International
DIRECTOR OF ECONOMICS
Fabiana D’Atri Senior Economist in the Department of Research and Economic Studies at Bradesco
EXECUTIVE SECRETARY
Roberto Fendt [email protected] HONORARY MEMBERS +55 21 3212-4350 Luiz Fernando Furlan www.cebc.org.br Ivan Ramalho MEMBERS OF BRAZILIAN SECTION
CHINESE CHINESE INVESTMENTS IN BRAZIL INVESTMENTS 2016 IN BRAZIL 2016